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TMI Blog2019 (4) TMI 1431X X X X Extracts X X X X X X X X Extracts X X X X ..... e, liable for deduction of tax at source. Payment was for services and facilities in connection with aircraft operations at the airport in accordance with international protocols and the Airport Authority was providing these facilities for landing and takeoff of aircrafts and in the whole process, use of land was incidental. On the contrary, where the protocol prescribe detailed methodology for fixing these charges, the charges were not for use of land perse and therefore, could not be treated as rent within meaning of section 194-I. Applying the ratio to the facts of present case, in view of the dictate of the Apex Court (supra), we hold that Wharfage charges paid by assessee are charges which facilitate the loading / unloading of goods at waterfront and for providing facilities, Wharfage charges are charged from the assessee and in such case, we hold that there is no use of land but even if it was held that there is any use of land, then the same was incidental but such payments could not be treated as rent and the assessee be liable to deduct tax at source under section 194-I. The Wharfage charges paid by assessee are to be allowed as deduction u/s 37(1) . The ground assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n short 'the Act'). 2. Both the appeals relating to same assessee were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The assessee in ITA No.2148/PUN/2013, relating to assessment year 2009-10 has raised the following grounds of appeal:- 1. The order of the Commissioner (Appeals) is against law and facts and circumstances of the case. 2.1 The Commissioner (Appeals) erred in summarily dismissing the appeal by merely repeating what the Assessing Officer had said and ignoring all the grounds raised in the appeal before him and deciding the issue on erroneous assumptions. 2.2 The Commissioner (Appeals) having noted that there is no tenancy by the Maharashtra Maritime Board nor it is meant to lease out any asset to the appellant and it is only a payment in the nature of 'toll' or 'fee' for providing the infrastructure facility and the measure for levy is merely based on loading and unloading weight and is collected for functioning, maintaining and running the Board and therefore to categorise it as a 'Rent' within the meaning of Section 194-I is totally misconceived. 2.3 The Commissioner (Appeals) also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warranted by any rule or law and so the conclusions are misplaced and ignores factual service by these employees. 4.3 The observations and conclusions of the Commissioner (Appeals) are not warranted and does not exhibit judicious approach to the issue. 5.1 The Commissioner (Appeals) erred in confirming the disallowance under 40A(3) without appreciating facts. 5.2 The Commissioner (Appeals) did not find these purchases to be sham or bogus and they have been used in the business due to absence of power supply by Electricity Board and having regard to the location of the sellers and business needs the payment cannot be disallowed on technicalities. 5.3 The Commissioner (Appeals) ought to have noted that in so far as these purchases are concerned the employees are implied agents of the Appellant and therefore it falls under Sub rule (k) of Rule 6DD of the Income-tax Rules, 1962. 5.4 The observations of the Commissioner (Appeals) in para 15 of his order ignores realities and is only based on artificial reasons and therefore lacks judicious approach and practical wisdom and hence the conclusions. 4. At the outset, the learned Authorized Representative for the assessee pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manatha Aiyyar & Justice Y.V. Chandrachud, wherein the 'land' was defined to include bed of the sea or river below high water mark, and also things attached to the earth or permanently fastened to anything attached to the earth. This was the definition under Major Port Trust Act in section 2(k). Under section 2(17) of the Wildlife (Protection) Act (53 & 1972), 'land' includes canals, creeks & other water channels, reservoirs, rivers, streams, marshes & wet lands & also include boulders & rocks. Further, definition of 'Wharf' as per the Oxford Dictionary was referred to i.e. a landing place or pier where ships may tie up and load or unload; a shore or riverbank; a platform of timber, stone, concrete, etc. built parallel to the waterfront at a harbor or navigable river for the docking, loading and unloading of ships. The word 'Wharfage' was defined as use of Wharf and its facilities. The Assessing Officer noted that the word 'land' and 'Wharf' were not defined under the Act and he referred to general meaning of two expression and also relied on the ratio laid down by the Hon'ble Supreme Court in Anant Mills Co. Ltd. Vs. State of Gujrath & Others [AIR 1975 SC 1234, 1250 and held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri district. As the assessee had failed to deduct tax at source under the provisions of section 194-I of the Act, payments totaling ₹ 56,57,221/- were disallowed, in view of provisions of section 40(a)(ia) of the Act and added to the income of assessee. 7. The CIT(A) noted that the plea of assessee first was that payment was fees and not rent and second, it was that the said payment was in the nature of cess or tax. The CIT(A) noted that as per Wikipedia, fees was defined as price paid as remuneration for services. He further observed that where the assessee himself had accepted that the Board does not provide any services to the assessee, then it was not fees. Further, as per dictionary meaning 'land' included water and since the assessee was charged for use of waterfront by the ships on which goods were loaded, then in fact payment was made for privilege to use waterfront and mooring of ships on which goods were loaded by the assessee. The said payment was held to be in the nature of rent. The CIT(A) observed that whether or not the ships belong to the assessee did not matter, ships were in the use of assessee. Further, the CIT(A) held that even if the assessee was under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was when the income was by way of rent; Explanation under the said section defines 'rent'. Referring to the facts of the case, the learned Authorized Representative for the assessee stated that there was no lease, sub-lease, tenancy or any other agreement or arrangement between the assessee and the Board, for the use of land/water. He further pointed out that the Department's case was vis-à-vis water under the land. In this regard, he referred to the decision of the Hon'ble Bombay High Court in CIT Vs. Maharashtra State Electricity Distribution Co. Ltd. (2015) 375 ITR 23 (Bom), wherein the dispute was in the case of assessee distributing electricity to consumer. The Hon'ble Bombay High Court while deciding the wheeling and transmission charges levied for supply of electricity had held that these were not equated to rent or fees for technical services. Our attention was drawn to paras 37 to 39 of the said judgment and it was pointed out that reliance was placed on the ratio laid down by the Hon'ble High Court of Madras in CIT Vs. Singapore Airlines Ltd. (2013) 358 ITR 257 (Mad), wherein the meaning of rent was explained and it was held that the same must be understood i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess, the same could not be held to be rent. The term 'Wharf' as per the Oxford Dictionary means a landing place or pier where ships may tie up and load or unload; a shore or riverbank; a platform of timber, stone, concrete, etc. built parallel to the waterfront at a harbor or navigable river for the docking, loading and unloading of ships. There is no separate definition of land or Wharfage charges under the Income Tax Act. The Assessing Officer has relied on the definition of 'land' in legal parlance. In this regard, he has relied on the definition in 'Concise Law Dictionary' by P. Ramanatha Aiyyar & Justice Y.V. Chandrachud, wherein the 'land' was defined to include bed of the sea or river below high water mark, and also things attached to the earth or permanently fastened to anything attached to the earth. This was the definition under Major Port Trust Act in section 2(k). He then, referred to the definition of 'Wharf' as per the Oxford Dictionary i.e. a landing place or pier where ships may tie up and load or unload; a shore or riverbank; a platform of timber, stone, concrete, etc. built parallel to the waterfront at a harbor or navigable river for the docking, loading and unlo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wharfage, storage or demurrage of goods on any such place. There are other sections, under which the Board can prescribe scale of rates. However, as per section 41 of the said Act, prior sanction of State Government to prescribe rates and conditions is necessitated. The said section reads as under:- "41. Every scale of rates and every statement of conditions framed by the Board under the foregoing provisions of this Chapter shall be submitted to the Government for sanction and shall have effect when so sanctioned and published by the Board in the Official Gazette." 15. Under section 42 of the said Act, State Government is empowered that whenever it considers necessary in the public interest so to do, it may, by order in writing, direct the Board to cancel any of the scales in force or modify the same within such period as it may specify. Sub-section (3) to section 43 provides that when in pursuance of this section any of the scales has been cancelled or modified, such cancellation or modification shall be published by the Government in the Official Gazette and shall thereupon have effect accordingly. 16. Reading the provisions of the said Act, it becomes clear that the Maharas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y lease, sub-lease, tenancy or any other agreement or arrangement, for the use of land or building, land appurtenant to building, etc. If we look at the said section and Explanation thereunder defining term 'rent' under the said section, then it talks of a contract between two parties, under which the amount is payable to the account of payee. The understanding has to be first between the parties i.e. in the form of some kind of contract or agreement or arrangement in lieu of which charges are paid or credited to the account of payee and it is the obligation of payer to deduct tax at source out of such payments. However, if we look at the nature of charges paid, it is levy imposed by State Government through Board. 19. Further, the case of Revenue is that 'land' includes water and since Wharfage charges are paid for utilizing water space, the assessee was obliged to deduct tax out of such payments. The CIT(A) has held that where the assessee was paying charges for use of waterfront, then again there was obligation on the assessee to deduct tax at source. But the main issue which has escaped the attention of both the lower authorities is that the Board do not own water or the water ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court of Madras in CIT Vs. Singapore Airlines Ltd. (supra) and differing from the view of the Hon'ble Delhi High Court in United Airlines Vs. CIT (supra), accepted the view taken by the Hon'ble High Court of Madras in CIT Vs. Singapore Airlines Ltd. (supra). It was observed that right from the moment a flight is permitted to land at a particular airport, a process is set into motion, to guide the aircraft to the runaway, for successful landing and after the aircraft had come to a halt it is led to a parking space allotted to it once again with the navigational help. It is only thereafter that the aircraft is said to be parked till it resumes it flight. The Hon'ble High Court referred to arguments of senior Counsel and an example was drawn to use of a toll road (instead of highway) and it was mentioned that if use of a toll road could be characterized as use of land, it would be an extreme view if it was held that toll to be paid for use of a toll road would be subject to deduction of tax at source only, because it could also be characterized as rent for use of land. The Hon'ble High Court then referred to the decision of Hon'ble Supreme Court in the case of Japan Airlines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, we hold that there is no use of land but even if it was held that there is any use of land, then the same was incidental but such payments could not be treated as 'rent' and the assessee be liable to deduct tax at source under section 194-I of the Act. The Wharfage charges paid by assessee are to be allowed as deduction under section 37(1) of the Act. The ground of appeal No.2.2 raised by assessee is thus, allowed. 24. The grounds of appeal No.1 and 2.1 are general in nature and do not require any adjudication. The ground of appeal No.2.2 is allowed. The grounds of appeal No.2.3 and 2.4 are not pressed. The ground of appeal No.3.1 is argumentative in nature and ground of appeal No.3.2 and 3.3 are general and does not need any deliberation. 25. The ground of appeal No.3.4 and ground of appeal No.4.1 to 4.3 are issues raised against the non allowance of foreign travel and salary expenses of employees of sister concern deputed to assessee. The assessee claimed that it was reimbursement of expenses of employees of flagship company deputed to it. The Assessing Officer asked the assessee to furnish various details of their employment and appointment, etc. and in the absence of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. vide ground of appeal No.5.1 against disallowance made under section 40A(3) of the Act; certain expenses were incurred in cash totaling ₹ 1,80,361/-. The Assessing Officer was of the view that the said expenditure is not to be allowed in the hands of assessee, in view of provisions of section 40A(3) of the Act. The plea of assessee that expenditure was incurred at remote areas and because of business exigencies was not accepted. We find no merit in the orders of authorities below in this regard. In view of provisions of Rule 6DD(k) r.w.s. 40A(3) of the Act, in case of expenditure being incurred at remote areas, the same merits to be allowed in the hands of assessee. We are deciding this issue in favour of assessee because of smallness of the quantum involved. The ground of appeal No.5.1 raised by assessee is thus, allowed. The grounds of appeal raised by assessee are thus, partly allowed. 29. Now, let us take up the appeal for assessment year 2010-11. The issue in ground of appeal No.1 is against disallowance made of ₹ 29,01,450/- on account of non deduction of tax at source out of Wharfage charges paid to Maharashtra Maritime Board. We have already decided this i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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